Newport News airport, former restaurant owner still at odds over lease, payments

A new restaurant opened at the Newport News/Williamsburg Airport on Tuesday, June 13. The restaurant is run by airport employees rather than an outside vendor. It features new tables and seating, a scenic view of the tarmac and planes and some modern amenities like a video wall.

Even as a new restaurant opened Tuesday at Newport News/Williamsburg International Airport, a dispute with the past restaurant vendor is still going strong — with that company asserting that the Peninsula Airport Commission owes it more than $800,000 to reimburse it for past capital investments.

New Dominion Clubs — a Hampton company that operated food services at the airport since 2003 — contends it pumped more than $1.55 million in capital improvements into the airport over the years. Under the terms of the lease, that company says, the airport must reimburse $815,184 of the total.

That's over and above any damages that could result from separate litigation over whether the Peninsula Airport Commission — a six-member body that oversees the airport — acted improperly when it suddenly and unilaterally revoked the restaurant's 15-year lease last fall.

Though Newport News Circuit Court judge Gary A. Mills ruled in February that the commission was within its rights to terminate the lease, New Dominion has since filed a motion for reconsideration.

After Mills recused himself from the case in March, the Virginia Supreme Court appointed a retired Circuit Court judge, Herbert C. Gill Jr. of Chesterfield County, to hear the request for reconsideration. The hearing is scheduled for July 20.

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Meantime, an all-new restaurant — to be run by airport employees rather than an outside vendor — opened at the airport on Tuesday. For the past several months, the airport's flying travelers had been making due by buying food from vending machines and Hudson News, a store that sells some snacks and drinks and limited sandwich options.

The new restaurant is in the concourse area, with a view of the tarmac and planes. "It's a good-looking site, and it's a pretty spectacular panoramic view," said the airport's lawyer, James S. McNider III. "It's a beautiful place. We're really hoping and expecting that when airlines come in and see what a hospitable and attractive facility we have, that will enhance our ability to get air service."

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Though the new restaurant doesn't currently serve alcohol, McNider said the airport is applying for a license with the Virginia Department of Alcoholic Beverage Control to be able to do so.

Tom McDermott, New Dominion Clubs' owner, has said that before his airport lease was rescinded in October, his company was led to believe it would be operating the new restaurant. In fact, he said, his company helped plan the new space.

The 2010 lease between New Dominion Clubs and the Peninsula Airport Commission required the airport to pay the company for its capital improvements, subtracting out depreciation "on a straight line basis" over 10 years.

New Dominion says it put in $971,468 into the Blue Sky Cafe, a former restaurant located in the terminal, between 2010 and 2014. It says it put $439,050 into a kiosk and bar site on Concourse B. And it says it put another $140,422 into sites on Concourse A.

That total — $1.55 million — translates into $815,184 after the depreciation, New Dominion contends.

New Dominion's vice president, Brittany Stellute, said the $1.55 million estimate is a conservative one. "I spent more than that, but that's just the amount that I could prove" with invoices, receipts, canceled checks and other records, she said.

But McNider contends that New Dominion and McDermott have not provided "sufficient documentation" to determine how the $1.55 million was calculated.

"He has refused to give us all of the source documents, the tax returns and other confirmatory documentation we have requested," McNider said. "I don't think he's giving us the right number."

When New Dominion left airport premises in March, McNider said, some of the items — such as coolers, refrigerators, computers and other items — were removed, with McNider saying some of the removed items were included in the amount the company wants reimbursed.

"We're not going to pay him for the stuff he carted out," McNider said. "He's charging us for some of the stuff he kept. He doesn't get to keep the stuff and then get reimbursed for it."

McNider said that in Judge Mills' February order siding with the Peninsula Airport Commission over the right to terminate the lease, he also said the airport "must reimburse New Dominion for the net book value" of its capital investments as outlined in the lease. But McNider contended that because Mills' decision was put on hold — on account of the motion for consideration filed by New Dominion — "there is no requirement for reimbursement until, at the earliest, the July 20 hearing."

New Dominion Clubs' lawyer, Kevin J. Cosgrove of Hunton & Williams, said McNider "is wrong on so many levels."

"The obligation to reimburse New Dominion is separate and apart from the issues set forth in the lawsuit," Cosgrove said. "The lawsuit and Judge Mills' order have nothing to do with the commission's obligation to repay New Dominion." Though Mills ordered that the capital investments to be reimbursed, Cosgrove said, the obligation also arises "strictly by operation" of the lease agreement itself.

Cosgrove also said that the "so-called source documents such as tax returns are irrelevant, because tax returns don't deal with capital improvements." Instead, he said, tax returns include "leasehold improvements," which are different.

"I've offered on several occasions to sit down with (McNider) and discuss this issue — about his specific concerns about specific items," Cosgrove said. "He has steadfastly refused to talk to me or engage any of these issues. He is simply stonewalling me. I will sit down with him tomorrow morning at a place of his choosing. ... At the end of the day, the issue is that they just don't want to pay."

Stellute, New Dominion's vice president, said coolers and other equipment are included in the company's capital investment because that's what they were.

"We had to remove everything by March 14, and it's all in a storage unit on Jefferson Avenue," she said. "When the matter is resolved, it's all sitting there. We weren't going to take the chance of everything being thrown out and then having to buy new equipment again if the case is ruled in our favor."

McNider declined to comment on why he won't sit down with Cosgrove, saying, "We're not being unreasonable in waiting for the judge's final decision."

It was during the recent dispute that McDermott filed an open-records request for documents pertaining to an airport-backed loan to People Express Airlines — which the restaurant owner had learned about over the years. That request is what led the Daily Press to ask questions about the loan in early February — ultimately leading to the discovery that $4.5 million in taxpayer money was used to cover the loan.

That finding led Virginia Secretary of Transportation Aubrey Layne to cut off future state construction grants to the airport. On March 2, the airport's former lawyer, Herbert V. Kelly Jr., was terminated as the airport board's lawyer, a post that had been in his family for decades. The same day, Newport News City Manager Jim Bourey resigned as an airport commissioner, then stepped down as city manager a few days later. Airport executive director Ken Spirito was later fired by the board after auditors said he spent thousands of dollars of public money on personal expenses.